Booming US NGL exports idled with closure of Houston Ship Channel

The closing of the Houston Ship Channel is idling ships that carried a record amount of US NGL exports last year, raising questions about the need for geographic diversity in the burgeoning market.

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BY DAN MURTAUGHBloomberg

HOUSTON -- The closing of the Houston Ship Channel is
idling ships that carried a record amount of US natural gas
liquids exports last year,raising questions about the need
for geographic diversity in the burgeoning market.

Most United States capacity to export NGLs is on the
channel, said Peter Fasullo, a principal at Houston-based
energy consultant EnVantage. The United States averaged
475,000 bpd of exports in 2013, up from 164,000 in 2010,
according to Energy Information Administration data. Two
companies, Enterprise Products and Targa Resources, have
channel operations that combine to represent 380,000 bpd of
export capacity, Fasullo said.

Thats all going to go offline, Fasullo
said.Ships cant get into the terminals to get
loaded, and those that are loaded cant get out.

There is no estimate on when the 83 km channel will
reopen,United States Coast Guard Captain Brian Penoyer said
at a press conference in Texas City. The channel was shut
March 22,when a vessel and barge collided near where the
waterway meets the Gulf of Mexico, causing the release of
about 4,000 bbl of fuel oil.

There are 140 vessels waiting to move through the channel,
the Coast Guard said. The channel is closed from just north
of Texas City down to its entrance,at Bolivar. Toreopen the
channel,the Coast Guard needs an uncontaminated lane for
ship traffic and to be sure the traffic wont impede
cleanup, Penoyer said.

Propane, Butane

Enterprise operates a 14,000 bbl/hour tanker terminal and a
5,000 bbl/hour barge facility on the channel. Capabilities
at those facilities have been
limited somewhat, Houston based spokesman Rick
Rainey said by e-mail.

Targa can export 115,000 to 130,000 bpd from its terminal
in Galena Park. Jennifer Kneale,a Houston-based spokeswoman
for the company, declined to comment on operations.

Exports of NGLs such as propane and butane have risen as
production increased 67 % from the start of 2009, driven by
shale fields in Texas, Pennsylvania and other states.

The United States exported 626,000 bpd of natural gas
liquids in December, EIA data show. By comparison, exports
of distillate fuel were 1.2 million and finished motor
gasoline exports were 576,000.

The ship channel is the closest waterway to Mont Belvieu,
Texas, home to the largest NGL storage capacity in the
world. Terminals on the channel have been the
workhorse for NGL exports so far, Fasullo said.

Other Ports

Companies are planning to spend $35 billion on new projects and expansions along the ship
channel, according to a 2012 Greater Houston Port Bureau
survey. The weekend spill is the type of incident that can
raise questions about how much more traffic the channel can
take, Fasullo said.

The industry has to think about how much
infrastructure the channel can really handle, he
said.Because were putting a whole lot of
traffic on one waterway.

Companies like Phillips 66 and Occidental Petroleum are
planning NGL export terminals on other Texas ports.
Occidental plans to use most of the space on a 110,000-bpd
NGL pipeline to Corpus Christi from Mont Belvieu for an
export terminal at a former naval base in Ingleside,Texas.

Phillips 66 is investing in an NGL export terminal in
Freeport,Texas, about 30 miles southwest of where the
channel opens to the Gulf of Mexico. The spill illustrates
why the United States NGL industry needs to spread export
capacity to other areas, Jim Webster, Phillips 66s
general manager of midstream, said in an interview in
Houston.

Its like your personal portfolio, Webster
said after speaking at the IHS International LPG
Summit.You want to diversify your risk,whether
thats in bonds and stocks or whether thats in
where fractionation capacity is and what waterways are
used.

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